Actual cash value (ACV) - The value of your property, based on the current cost to replace it minus depreciation. Also see “replacement cost.”

Additional living expenses (ALE) - Reimburses the policyholder for the cost of temporary housing, food, and other essential living expenses, if the home is damaged by a covered peril that makes the home temporarily uninhabitable. Policies cap the amount of ALE payable to 20 percent of the policy’s dwelling coverage.

Adjuster - An individual employed by an insurer to evaluate losses and settle policyholder claims. Also see “public insurance adjuster.”

Appraisal - An evaluation of a home insurance property claim by an authorized person to determine property value or damaged property value. Many policies provide an “appraisal” process to resolve claim disputes. In this process, you and the insurance company hire separate damage appraisers. The two appraisers choose a third appraiser to act as an “umpire.” The appraisers then review your claim, and the umpire rules on any disagreements. The umpire's decision is binding on you and the insurance company, but only for the loss amount. If there is a dispute over what is covered, you can still pursue a settlement of the coverage issue after the appraisal takes place. You are required to pay for your appraiser and half of the umpire's costs.

Binder - A temporary insurance contract that provides proof of coverage until you receive a permanent policy.

Claim - A policyholder's request for reimbursement from an insurance company under a home insurance policy for a loss to property.

Claimant - A person who makes an insurance claim.

Company profile - A summary of information about an insurance company, including its license status, financial data, complaint history, and a history of regulatory action.

Declarations page - The page in a policy that shows the name and address of the insurer, the period of time a policy is in force, the amount of the premium, and the amount of coverage.

Deductible - The amount the insured must pay in a loss before any payment is due from the company.

Depreciation - Decrease in the value of property over time due to use or wear and tear.

Earned premium - The portion of a policy premium that has been used to actually buy coverage, or that the insurance company has “earned.” For instance, if you have a six-month policy that you paid for in advance, two months into the policy, there would be two months of earned premium. The remaining four months of premium is “unearned premium.”

Endorsement - A written agreement attached to a policy expanding or limiting the benefits otherwise payable under the policy. Also called a “rider.”

Escrow - Money placed in the hands of a third party until specified conditions are met.

Exclusion - A provision in an insurance policy that denies coverage for certain perils, people, property, or locations.

File and Use - Residential property rates utilize a system called “file and use.” Under this system, insurance companies file their rates with the Texas Department of Insurance (TDI), but they do not need prior approval to implement new rates. If TDI determines that a company’s rates are excessive, the company can be ordered to pay refunds to the policyholders it overcharged. Companies can appeal adverse rate decisions.

First-party claim - A claim filed by an insured against his or her own insurance policy.

Grace period - The time – usually 31 days – during which a policy remains in force after the premium is due but not paid. The policy lapses as of the day the premium was originally due unless the premium is paid before the end of the 31 days or the insured dies. This is not a “free-insurance” period.

Independent adjuster - A person who charges a fee to an insurance company to adjust the company’s claim.

Inflation protection - Automatically adjusts your home insurance policy limits to account for increases in the costs to repair or rebuild a property.

Insurable interest - Any financial interest a person has in the property or person insured. In life insurance, a person´s or party´s interest - financial or emotional - in the continuing life of the insured.

Justified complaint – A complaint that exposes an apparent violation of a policy provision, contract provision, rule, or statute; or which indicates a practice or service that a prudent layperson would regard as below customary business or medical standards.

Lapse - The termination of an insurance policy because a renewal premium is not paid by the end of the grace period.

Liability coverage - Covers losses that an insured is legally liable. For homeowners insurance, liability coverage protects you against financial loss if you are sued and found legally responsible for someone else’s injury or property damage.

Loss - The amount an insurance company pays on a claim.

Loss of use - A provision in homeowners and renters insurance policies that reimburses policyholders for the additional costs (housing, food, and other essentials) of having to live elsewhere while the home is being restored following a disaster.

Loss history - Refers to the number of insurance claims previously filed by a policyholder. A company will consider loss history when underwriting a new policy or considering a renewal of an existing policy. Companies view loss history as an indication of the likelihood that an insured will file a claim in the future.

Market value - The current value of your home, including the price of land.

Material misrepresentation - A significant misstatement in an application form. If a company had access to the correct information at the time of application, the company might not have agreed to accept the application.

Peril - A specific risk or cause of loss covered by an insurance policy, such as a fire, windstorm, flood, or theft. A named-peril policy covers the policyholder only for the risks named in the policy. An all-risk policy covers all causes of loss except those specifically excluded.

Personal property - All tangible property (other than land) that is either temporary or movable in some way, such as furniture, jewelry, electronics, etc.

Property damage - Physical damage to property.

Public insurance adjuster - An individual employed by a policyholder to negotiate a claim with the insurance company in exchange for a percentage of the claim settlement. Public insurance adjusters must be licensed by TDI.

Reinstatement - The process by which a life insurance company puts a policy back in force after it lapsed because of nonpayment of renewal premiums.

Renters insurance - A form of insurance that covers a policyholder’s belongings against perils. It also provides personal liability coverage and additional living expenses. Possessions can be covered for their replacement cost or the actual cash value, which includes depreciation.

Replacement cost - Pays the dollar amount needed to replace the structure or damaged personal property without deducting for depreciation but limited by the policy’s maximum dollar amount.

Residual market - Insurers, such as assigned risk plans and the Texas FAIR Plan, that exist to provide coverage for those who cannot get it in the standard market.

Return premium - The premium returned to an insured for canceling or amending a policy.

Rider - A written agreement attached to the policy expanding or limiting the benefits otherwise payable under the policy. Also called an “endorsement.”

Single interest insurance - Insurance coverage for only one of the parties having an insurable interest in that property. For instance, if you still owe money on your mortgage and do not have homeowners insurance, your lender may take out a single interest insurance policy to protect its own interest in your property. Single interest insurance protects only the policy owner, not the homeowner.

Surcharge - An extra charge added to your premium by an insurance company.

Surplus lines - Coverage from out-of-state companies not licensed in Texas but legally eligible to sell insurance on a “surplus lines” basis. Surplus lines companies generally charge more than licensed companies and often offer less coverage

Third-party administrator (TPA) - An organization that performs managerial and clerical functions related to an employee benefit insurance plan by an individual or committee that is not an original party to the benefit plan.

Third-party claim - A claim filed against another person’s insurance policy.

Unearned premium - The amount of a pre-paid premium that has not yet been used to buy coverage. For instance, if you paid in advance for a six-month premium, but then cancel the policy after two months, the company must refund the remaining four months of “unearned” premium to you.

“Home sweet home,” a person’s “castle,” is a place where you can “hang your hat” and say what you please, because no one pays any attention to you anyway.

No other place has inspired more clichés than the home and it makes total sense; it’s the place where you make memories with family and friends, rejuvenate from the day-to-day struggles of the world, keep all of your stuff, and for most of us it’s often the largest purchase and/or investment we make in our lifetime.

While we all hate paying for insurance (until we really need it), this is one coverage that you cannot afford to go without.

What does Homeowners Insurance Protect? The typical Homeowners Insurance Policy offers protection for your dwelling, personal possessions, and personal liability.

Dwelling Coverage

The price you paid for your home is probably not the amount you will choose to insure it. Dave Ramsey strongly recommends that you purchase an amount of coverage at least equal to the estimated replacement cost. This is the estimated cost to actually rebuild your home if it were to burn to the ground. Since it is impossible to predict today what the exact cost will be to replace your home in the future, it’s important to keep your agent and policy up to date so that you have enough coverage to account for unforeseen circumstances.

Property Coverage

You've made a significant investment in your possessions, and they need to be protected. When it comes to Property Coverage, we recommend that you take the time to fully understand what your category limits and per item limits are as well as how those limits could impact the amount you are paid for a covered loss or damaged personal item.

Personal Liability

Personal Liability Coverage on your homeowner’s insurance is one of the best buys in the insurance business. Because of its low cost, Dave Ramsey recommends that you purchase $500,000 of this coverage at a minimum. Personal Liability Coverage helps protect you against the financial uncertainty arising from injury (or property damage) that you or your family may cause to other people. It typically even covers injuries whether they happen on or away from your property.

If you do not have liability insurance, any of your following assets could be at stake:
• Retirement accounts (IRA, 401(k), pension plans)
• Non-retirement investments (stocks, bonds, mutual funds)
• Liquid assets (checking, savings, CDs, money market accounts)
• Personal property (actual value of all your possessions if you sold them: cars, boats, jewelry, furniture, etc.)
• Home and other real estate equity

The bottom line is although you have to decide what your personal budget is, this is coverage that you cannot afford to go without. If you have accumulated some assets you may want to ask about an Umbrella Policy as an inexpensive way to pick up where your Personal Liability coverage ends.